The lessons from the Great East Japan Earthquake and the Great Floods in Thailand
Masahisa Fujita, 18 November 2013
A major feature of globalisation in the last decades has been the emergence of global supply chains, especially in Asia. This column explains how supply chains may increase the risks of shock contagion across countries. It shows how the earthquake and tsunami in Japan, and the floods in Thailand had ripple effects on the Japanese automobile industry across countries. It suggests that greater international cooperation, such as the development of sister industrial clusters, is one way to mitigate the risks.
The Great East Japan earthquake which occurred on 11 March 2011 had a surpassing 20 meters high that hit several hundred kilometres of the Tohoku coastline on the eastern side of Japan, and cost the lives of approximately 18,000 people. This was followed by a nuclear crisis categorised as level 7 on the International Nuclear Event Scale.
Topics: Industrial organisation, International trade
Tags: global supply chains, Japan, natural disasters
Reduced policy uncertainty and the Japanese economy
Masayuki Morikawa, 2 November 2013
Reduced policy uncertainty can contribute to a country’s economic growth. This column highlights the negative influence of policy uncertainty and political instability on the growth of Japan. A survey shows that international trade and tax polices pose the greatest uncertainty on Japanese companies. The column concludes with a discussion of the mechanism via which uncertainty affects corporate behavior.
While the effects of the 'three arrows' of the Japanese Abenomics policy mix – bold monetary easing, flexible fiscal policy, and the growth strategy –have attracted worldwide attention, reduced policy uncertainty is also expected to contribute to the country’s economic growth by stimulating long-term investments in the private sector.
Topics: Institutions and economics
Tags: economic growth, Japan, uncertainty
The future of Japan’s Long-term Care Insurance Program
Satoshi Shimizutani, 12 September 2013
Policymakers in the developed world are fretting over how to care (and pay) for their ageing populations. This column unpacks the thinking behind Japan’s extensive Long-term Care Insurance Program, arguing that there are too many sweeping assumptions about the elderly and how they behave. So how can we best design policy for long-term care? As ever, it is only from well-funded and comprehensive datasets – such as the Japanese Study on Aging and Retirement, now in its fourth year – that effective policy will come.
The debate of social-security-system reform in Japan is now entering a crucial stage.
Topics: Health economics, Welfare state and social Europe
Tags: Ageing, care, Japan
Consumption-tax fears risk stalling Abe’s ‘three arrows’
Takatoshi Ito, 11 September 2013
Abenomics comprises three ‘arrows’. The monetary and fiscal arrows have been launched; the pro-growth arrow has not. This column suggests that arguments over the consumption tax burn up precious political capital that would be better spent on growth reforms. A consumption-tax hike won’t stall the expansion, but debates over it threaten to stop reform momentum. The time to release the third arrow is now.
Abenomics is Japanese Prime Minister Abe’s policy package consisting of three ‘arrows’:
- Aggressive monetary easing.
- Flexible fiscal policy.
- Growth strategies.
Together, they aim at lifting Japan’s economy from chronic deflation and stagnation to a normal economy with 2% inflation and strong growth.
Topics: Politics and economics, Taxation
Tags: growth strategy, Japan
Identifying conventional and unconventional monetary policy shocks
Takeshi Kimura, Jouchi Nakajima, 31 August 2013
Unconventional monetary policy is now routine, but its impact is still poorly understood. A key difficult is empirically separating policy changes – ‘shocks’ – from other factors driving the economy. This column proposes a new estimation framework for identifying monetary-policy shocks in both conventional and unconventional policy regimes and applies it to Japan. Japan’s increase in bank reserves lowered long-term interest rates in the unconventional policy regime and may have had a positive impact on inflation and the output gap.
The widely used approach to evaluating the macroeconomic effects of unconventional monetary policy is the ‘plug-in’ approach, which uses estimates of the impact of unconventional policy measures on asset prices to plug them into standard macroeconomic models. For example, Chung et al. (2012) use the estimate reported in Gagnon et al.
Topics: Monetary policy
Japan’s still-falling inflation rate is signalling the need for labour-market reforms
Ayako Saiki, 15 June 2013
Abenomics is all the rage. Japan’s GDP grew at an annual rate of 3.5% in the first quarter, the stock market went up by almost 30% since December, and despite some uncertainties, sentiments, consumption, and exports are all picking up. However inflation is at -0.9% and survey-based inflation expectation has remained flat. Is inflation going to happen at all? This column argues the answer crucially hinges upon the implementation of structural reforms, especially in the labour market.
Abenomics is all the rage.
- Japan grew at 3.5% in the first quarter;
- The stock market is up; and
- Sentiments, consumption, and exports are all picking up – even if recent stock-market performance has created some uncertainties.
But negative inflation is still present.
Topics: Macroeconomic policy
Tags: Abenomics, Japan, labour-market reforms
Estimating the effect of the TPP on Japan’s growth
Yasuyuki Todo, 11 May 2013
Japan looks set to participate in the Trans-Pacific Partnership (TPP) negotiations. Reflecting the current debate in Japan, this column assesses what effect the Partnership will have on Japan’s growth. Evidence suggests that the economic effects may be far bigger than the current consensus suggests.
Prime Minister Abe recently announced that Japan would participate in the Trans-Pacific Partnership negotiations, with all other Trans-Pacific Partnership parties now having accepted Japan.1 This trade demarche is viewed as a key part of ‘Abenomics’ (Petri, Plummer and Zhai 2013). Although the dye has been cast, the debate in Japan has not ended.
Topics: International trade
Tags: FDI, foreign direct investment, Japan, TPP, Trans-Pacific Partnership
Augmented inflation targeting: Le roi est mort, vive le roi
Richard Baldwin, Daniel Gros, 17 April 2013
The Bank of Japan has now joined the club of central banks practising a new, post-Crisis form of inflation targeting. This column discusses the new goals, new tools and new challenges of ‘augmented inflation targeting’. Despite economists’ worries and the many unknowns ahead, there really is no alternative in a post-Crisis world. Augmented inflation targeting is here to stay.
The Bank of Japan recently embraced inflation targeting – a decade and a half after academics recommended it (Krugman 2013). But this is not inflation targeting as conceived before the Global Crisis.
Topics: Global crisis, Monetary policy
Tags: augmented inflation targeting, Eurozone crisis, Japan
The much-needed EU pivot to east Asia
Patrick A Messerlin, 16 April 2013
Mega-regional trade arrangements are being negotiated in Asia. This column asks how Europe should respond and assesses which Asian trade deals would provide the biggest boost and the best insurance against discriminatory effects. The evidence tentatively suggests Europe’s best bets are Japan and Taiwan.
The EU is facing formidable challenges. The economic crisis is far from over in many Eurozone and non-Eurozone member states. The EU’s current macroeconomic and budgetary policies are not politically sustainable at the EU’s current anaemic growth rate.
Topics: International trade
Tags: EU, Eurozone crisis, Japan, Taiwan
Public investments for long-term economic growth: the case of health
Michael Stolpe, 22 March 2013
The crisis has shot holes in government budgets devoted to pro-growth public goods. This column argues that health-related public goods support long-term economic growth. Governments may be more inclined to focus on spending related directly to jobs, such as education and welfare-to-work programmes, but health should not be forgotten
Crisis or not, healthcare cries out for large-scale public investments that lock in what appears to be an historic trough in government borrowing costs in many of the world’s advanced countries.
Topics: Health economics
Tags: Ageing, Europe, investment, Japan, US